Tokenization is a technique used to protect sensitive information, such as credit card numbers, when making transactions. It is a method used to reduce the risk of sensitive data breaches, and to meet PCI-DSS compliance requirements. Tokenization works by replacing sensitive data, such as a credit card number, with a unique placeholder called a “token.” The token is a randomly generated string of numbers and letters that is assigned to represent the sensitive data, and can be used in place of the sensitive data throughout the transaction process.

The tokenization process works as follows:

  • A customer’s credit card information is sent to the tokenization service, which can be provided by the payment processor or a third-party provider.
  • The service encrypts the credit card information and assigns a unique token to represent it.
  • The token is then sent back to the merchant, who can use it to process the transaction instead of the original credit card information.

The token can then be used for all the transactions related to that particular card, without the need to store the sensitive information on the merchant’s systems. This helps to protect the sensitive data from potential breaches.

When it comes to safety, tokenization is considered a highly secure method for protecting sensitive information. Tokens are randomized and cannot be reverse-engineered to determine the original data, meaning that even if a token is intercepted, it would be difficult for anyone to use it to access the original sensitive information. Additionally, tokens are typically only valid for a single merchant, which makes it difficult for hackers to use them in other contexts.

Regarding who stores the token, generally, the tokens are stored by the tokenization service provider, this ensures that the sensitive information is kept in a highly secure environment. This can add an extra layer of protection against data breaches, as it reduces the number of places where sensitive information needs to be stored and protected.

Tokenization can be also useful for subscription billing. Subscription billing often requires the storage of credit card information for recurring charges, and tokenization can be used to securely store and process these payments. By tokenizing the credit card information, the sensitive data is replaced with a token, which can be stored on the merchant’s systems and used to process recurring payments without the need to store the original credit card information. This can help to reduce the risk of data breaches and to meet PCI-DSS compliance requirements.

Overall, tokenization is a secure method for protecting sensitive information during transactions, and it’s widely used in various environments, including subscription billing, to reduce the risk of data breaches and to meet regulatory compliance requirements.